During early 1935 Mario Castoldi, lead designer of Italian aircraft company Macchi, commenced work on a series of design studies for a modern monoplane fighter aircraft, which was to be furnished with retractable landing gear.[10] Castoldi had previously designed several racing aircraft that had competed for the Schneider Trophy, including the Macchi M.39, which won the competition in 1926. He had also designed the M.C. 72. From an early stage, the concept aircraft that emerged from these studies became known as the C.200.
In 1936, in the aftermath of Italy's campaigns in East Africa, an official program was initiated with the aim of completely re-equipping the Regia Aeronautica with a new interceptor aircraft of modern design. The 10 February 1936 specifications formulated and published by the Ministero dell'Aeronatica, called for an aircraft powered by a single radial engine, which was to be capable of a top speed of 500 km/h  along with a climb rate of 6,000 meters of 5 minutes. This envisioned aircraft, which was to be capable of being used as an interceptor for performing the "defence of the national security in emergency" soon had additional requirements specified, such as a flight endurance of two hours and an armament of a single (later increased to two) 12.7 mm  machine gun

In response to the prescribed demand for a modern fighter aircraft, Castoldi submitted a proposal for an aircraft based upon his 1935 design studies. On 24 December 1937, the first prototype (MM.336) C.200 conducted its maiden flight at Lonate Pozzolo, Varese, with Macchi Chief Test Pilot Giuseppe Burei at the controls. Officials within the ministry and Macchi's design team fought over the retention of the characteristic hump used to enhance cockpit visibility; after a protracted argument, the feature was ultimately retained

The first prototype was followed by the second prototype early on during the following year. During testing, the aircraft reportedly attained 805 km/h  in a dive free of negative tendencies such as flutter and other aeroelastic issues; although it could achieve only 500 km/h  in level flight due to a lack of engine power. Nevertheless, this capability was superior than the performance of the competing Fiat G.50 Freccia, Reggiane Re.2000, A.U.T. 18, IMAM Ro.51, and Caproni-Vizzola F.5; of these, the Re.2000 was seen as the most capable of the C.200's rivals, being more maneuverable and capable of greater performance at low altitude but lacking in structural strength.

The C.200 benefitted greatly from wider preparations that were being made for major expansion of the Italian Air Force, known as Programme R. During 1938, the C.200 was selected as the winner of the tender "Caccia I" (fighter 1st) of the Regia Aeronautica. This choice came in spite of mixed results during flight testing at Guidonia airport; on 11 June 1938, Maggiore Ugo Borgogno had warned that when tight turns at beyond 90° were attempted, the aircraft became extremely difficult to control, including a tendency to turn upside down, mostly to the right and entering into a violent flat spin.

Shortly following the completion of the second prototype, an initial order for 99 production aircraft was placed with Macchi. The G.50, which during the same flight tests held at Guidonia airport had out-turned the Macchi, was also placed in limited production, because it had been determined that the former could be brought into service earlier. The decision, or indecision, involved in producing multiple overlapping types led to greater inefficiencies in both production and in operation. In June 1939, production of the C.200 formally commenced.

The most serious handicap was the low production rate of the type. According to some reports, in excess of 22,000 hours in production time was attributed to the use of antiquated construction technology. A lack of urgency shown by the authorities regarding standardisation was also viewed as having negatively affected mass production efforts, particularly in light of the lack of availability of key resources in Italy during the era. In order to improve the rate of output, the C.200 remained almost unchanged throughout its production life, save for adjustments to the cockpit in response to pilot feedback.

In addition to Macchi, the C.200 was also constructed by other Italian aircraft companies Società Italiana Ernesto Breda and SAI Ambrosini under a large subcontracting arrangement intended to produce 1,200 aircraft between 1939 and 1943. However, during 1940, the termination of all production of the type was considered in response to aerodynamic performance problems that had caused the loss of multiple aircraft; the type was retained after changes were made to the wing to rectify a tendency to go into an uncontrollable spin that could occur during turns.

In an attempt to improve performance, a C.201 prototype was created with a 750 kW (1,010 hp) Fiat A.76 engine;. work on this prototype was later abandoned in favour of the Daimler-Benz DB 601-powered C.202. At one point, it was intended that the Saetta was to have been replaced outright by the C.202 after only a single year in production, however, the C.200's service life was extended because Alfa Romeo proved to be incapable of producing enough of the RA.1000 (license-built DB 601) engines. This contributed to the decision to construct further C.200s that used C.202 components as an interim measure while waiting for the production rate of the engine to be increased.

At the beginning of 1940, Denmark was set to place an order for 12 C.200s to replace its aging Hawker Nimrod fighters, but the deal fell through when Germany invaded Denmark.A total of 1,153 Saettas were eventually produced, but only 33 remained operational by the time armistice between Italy and Allied armed forces in September 19

The Macchi C.200 was a modern all-metal cantilever low-wing monoplane, which was equipped with retractable landing gear and an enclosed cockpit. The fuselage was of semi-monocoque construction, with self-sealing fuel tanks under the pilot's seat, and in the centre section of the wing. The distinctive "hump" elevated the cockpit to provide the pilot with an unobstructed view over the engine. The wing had an advanced system whereby the hydraulically actuated flaps were interconnected with the ailerons, so that when the flaps were lowered the ailerons drooped as well. The Macchi provided an outstanding field of view since the cockpit was partially open and placed on the hump of the fuselage. As a result of its ultimate load factor of 15.1, it could reach speeds as fast as 500 MPH (True Air Speed) during dives.

Power was provided by the 650 kW (870 hp) Fiat A.74 radial engine, although Castoldi preferred inline engines, and had used them to power all of his previous designs. With "direttiva" (Air Ministry Specification) of 1932, Italian industrial leaders had been instructed to concentrate solely on radial engines for fighters, due to their superior reliability. The A.74 was a re-design of the American Pratt & Whitney R-1830 SC-4 Twin Wasp, performed by engineers Tranquillo Zerbi and Antonio Fessia, and was the only Italian-built engine that could provide a level of reliability comparable to Allied designs. The licence-built A.74 engine could be problematic. In late spring 1941, 4o Stormo's Macchi C.200s then based in Sicily, had all the A.74s produced by the Reggiane factory replaced because they were defective units. The elite unit had to abort many missions against Malta due to engine problems. While some figures considered the Macchi C.200 to have been underpowered, the air-cooled radial engine provided some pilot protection during strafing missions. Consequently, the C.200 was often used as a cacciabombardiere (fighter-bomber). Moreover, it was maneuverable and had a sturdy all-metal construction.

The C.200 featured a typical armament of a pair of 12.7 mm  Breda-SAFAT machine guns; while these were often considered to be insufficient, the Saetta was able to compete with contemporary Allied fighters. According to aviation author Gianni Cattaneo, perhaps the greatest weakness of the C.200 had been its light machine gun armament. Moreover, the radio was not fitted as standard, while its flight characteristics, even if better than the G.50, were not easily mastered by the average Italian pilot, even after new wings, which provided for improved flight characteristics, had been adopted.

Like other early Italian monoplanes, the C.200 suffered from a dangerous tendency to go into a spin. Early production C.200 aircraft showed autorotation problems similar to those found in the Fiat G.50 Freccia, IMAM Ro.51, and the AUT 18. At the beginning of 1940, a pair of deadly accidents occurred due to autorotation. Both deliveries and production were halted while the Regia Aeronautica evaluated the potential for abandoning use of the type, as the skill involved in flying the C.200 was considered to be beyond that of the average pilot. The problem was a product of the profile of the wing. Castoldi soon tested a new profile, but a solution to the autorotation problem was found by Sergio Stefanutti, chief designer of SAI Ambrosini in Passignano sul Trasimeno, based on studies conducted by German aircraft engineer Willy Messerschmitt and the American National Advisory Committee for Aeronautics (NACA). He redesigned the wing section according to variable (instead of constant) profile which was achieved by covering parts of the wings with plywood.

The new wing entered production in 1939/1940 at SAI Ambrosini and became standard on the aircraft manufactured by Aermacchi and Breda, a licensed manufacturer. After the modified wings of the Saetta were introduced, the C.200 proved to be, for a time, the foremost Italian fighter. The first production C.200 series, did not have armour fitted to protect the pilots as a weight-saving measure. Armour plating was incorporated when the units were going to replace the Saettas with the new Macchi C.202 Folgore (Thunderbolt) and often in only a limited number of aircraft. After the armour was fitted, the aircraft could become difficult to balance. During aerobatic maneuvers, one could enter an extremely difficult to control flat spin, forcing the pilot to bail out. On 22 July 1941, Leonardo Ferrulli, one of the top-scoring Regia Aeronautica pilots, encountered the problem and was forced to bail out over Sicily.

Following the signing of the armistice, which resulted in Italy's withdrawal from the Axis, only 33 C.200s remained serviceable. Shortly thereafter, 23 Saettas were transferred to Allied airfields in southern Italy, and flown for a short time by pilots of the Italian Co-Belligerent Air Force. During mid-1944, the C.200s of Southern Italy were transferred to the Leverano Fighter School; a lack of spare parts had made maintenance increasingly difficult, but the type continued to be used for advanced training up to 1947. A small number of C.200s were also flown by the pro-German National Republican Air Force, based in northern Italy. The latter was only recorded as using the type for a training aircraft but were not used for operations.

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